(Corrects first paragraph to say Chavez has been in power 14
years not 12)
LONDON Dec 10 Venezuelan dollar bonds rallied
sharply on Monday and debt insurance costs tumbled after the
nomination of a successor by ailing President Hugo Chavez raised
the prospect of his departure from office after 14 years in
Venezuelan yield spreads over U.S. Treasuries fell 56 basis
points to 758 bps, the narrowest since August 2008, on JP
Morgan's EMBI Global index. The most-traded 2027 dollar
bond jumped 2.3 cents on the dollar to 101.092.
Chavez stunned Venezuela at the weekend with an announcement
he had suffered a setback in his long-term battle with cancer
and named Vice President and Foreign Minister Nicolas Maduro to
take over, should he become incapacitated.
"This is the first time Chavez has been forthcoming on any
kind of succession arrangement. With that, expectations are
mounting that the Chavez ... rule will be coming to an end in
the foreseeable future," said Stuart Culverhouse, head of
research at Exotix brokerage in London.
Venezuela's five-year credit default swaps fell to 610 basis
points from the Friday close of 642, according to Markit data,
having fallen by over 80 bps since the end of November, when
Chavez returned to Cuba for cancer-linked treatment.
Markets expect that if a new election were needed, the
opposition, led by pro-business Henrique Capriles, could be in
its best position to win since Chavez took power in 1999.
Despite his ill-health, Chavez was re-elected earlier this
year, beating Capriles. Culverhouse said a Chavez departure
would not necessarily lead to a change of government although
the longer-term risk was one of political instability as a
transition is made from Chavez's highly centralised rule.
"We'll see a near-term rally while the news is digested but
it doesn't mean it's going to last," Culverhouse said.
(Reporting by Sujata Rao and Alice Baghdjian, editing by Mike